Ariana Co. issued $2,000,000 face amount of 15%, 20-year bonds on April 1, 2014. The bonds pay interest on a semi-annual basis on June 30 and December 31 each year.
(a.) Assume that market interest rates were slightly lower than 15% when the bonds were sold. Would the proceeds from the bond issue have been more than, less than, or equal to the face amount?
(b.) Independent of part (a), assume that the proceeds were $1,980,000. Write the journal entry or use the horizontal model to show the effects of issuing the bonds.
(c.) Assume that the bonds were issued for $1,980,000 as in part (b). Calculate the interest expense that Ariana Co. will show with respect to these bonds in its income statement for the year ended December 31, 2014, assuming that the discount of $20,000 is amortized on a straight-line basis.

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The Answer of Ariana Co. issued $2,000,000 face amount of 15%, 20-year bonds on April 1, 2014. The bonds pay interest on a semi-annual basis on June 30 and December 31 each year.
(a.) Assume that market interest rates were slightly lower than 15% when the bonds were sold. Would the proceeds from the bond issue have been more than, less than, or equal to the face amount?
(b.) Independent of part (a), assume that the proceeds were $1,980,000. Write the journal entry or use the horizontal model to show the effects of issuing the bonds.
(c.) Assume that the bonds were issued for $1,980,000 as in part (b). Calculate the interest expense that Ariana Co. will show with respect to these bonds in its income statement for the year ended December 31, 2014, assuming that the discount of $20,000 is amortized on a straight-line basis.

Ariana Co Issued $2,000,000 Face Amount of 15%, 20-Year Bonds on on April